What Is The Best 401k Plan For Me

What Funds Should You Buy

There are a variety of funds types to consider when saving for retirement. Here are the most popular options.

Actively managed mutual funds

These funds have been around for decades and are still the most-popular kind of security among retail investors. They hold a variety of stocks or bonds, and sometimes both, in one investment vehicle. Mutual funds are ideal for people who dont want to choose their own stocks. Instead, a professional fund manager can do it for you. If you want to own a bunch of international stocks, but dont want to pick individual companies, then buy an international stock fund. The same goes for tech stocks, U.S. stocks and corporate bonds theres a fund for everything. The main drawbacks are fees and flexibility. Because someone else is doing the stock picking, fees are higher on actively managed mutual funds than on other kinds of investment vehicles. You also cant buy or sell them during the day as theyre only priced after the market closes.

Index funds

Target date funds

Build your portfolio

A lot of people like investing on their own, but when it comes to retirement savings its a good idea to work with a financial advisor who has a certified financial planning designation. Here are a few things to look for in a good advisor.

Think about fees

You May Like: How To Do A Direct 401k Rollover

Strong Matching Contribution Formula

In 2016, Vanguard administered more than 200 distinct formulas for employer matching. With 70% of plans using it, the most popular formula is $0.50 per dollar on 6% of pay. Under this single-tier formula, an employee making $50,000 per year would get up to $1,500 in matching contributions.

The second most popular formula for employer matching contributions is $1.00 per dollar on the first 3% of pay and $0.50 on the next 2% of pay. Under this multi-tier formula, the same worker in our previous example would receive up to $2,000 in matching contributions. Keep in mind that 5% of plans using a single- or multi-tier formula put a cap of $2,000 for matching contributions.

In 2016, plans with matching contributions offered matches ranging from 1% to 6% of pay. The average and median promised match were 4.1% and 4.0%, respectively. These guidelines allow you to establish how your workplaces matching contributions formula stacks up against that from the competition.

Where Is Your Money Is Being Invested

Trust me, you dont need to become a financial expert to figure this out. Lets just answer some really simple questions about YOUR money:

• Is your money being invested in the stock market?
• Are the stocks primarily in the U.S., or are they international?
• Is the fund invested in the bond market? Or annuities? Or real estate? Or your own companys stock?

Its common for companies to offer target date funds, which, basically, are managed according to an asset allocation appropriate for your age. As you move from your 20s to your 30s, to your 40s, target date funds will adjust their portfolios. Just because your 401 might be invested in a target date fund, however, doesnt mean you shouldnt at least be aware of the current allocation.

Read Also: What Happens To My Roth 401k When I Quit

Save Invest And Save Some More

Most experts say at least 10% of your income should go toward retirement. If youve started saving later in life, you may need to bump that up.1

Not possible right now? Thats OK. Save what you can and commit to increasing 1% every year until you can hit the mark. Try to save enough to get your employers matching contribution so you dont leave money on the table.

Options for saving and investing can include:

• Company sponsored retirement plans like a 401, 403, or a Thrift Savings Plan for government employees
• A variety of investments like mutual funds, stocks, bonds
• Life insurance that builds cash value

The sooner you start, the more potential your money has to grow over time. Its all about compound earningswhen your money earns more money.

Lets say you invest $10,000. And you earn 5% over a year.

So now you have $10,500. Over the coming year, you make 5% not just on your initial $10,000 but also on the $500 you earned last year. Thats the benefit of compounding in action.2

Read When to start investing: 4 signs youre ready to learn more about the power of compound earnings.

To learn how 401s, traditional and Roth IRAs, and Roth 401s compare, read about retirement savings account options.

Recommended Reading: Can I Put My 401k Into An Ira

The 6 Best Solo 401 Companies Of 2022

• Best for Account Features: E*TRADE
• Best for Mutual Funds: Vanguard
• Best for Real Estate: Rocket Dollar

Get $100 when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply. Offer Disclosure.

Fidelitys self-employed 401 plan is our pick for best overall due to a combination of very low fees, a wide range of investment choices, and the companys emphasis on retirement savings.

• No regular account fees and no commissions for stock or ETF trades

• 10,000+ no-transaction-fee mutual funds including four Fidelity funds with no fund expenses

• Retirement resources including calculators, apps, and education resources to help you improve your retirement savings and investment strategy

• Some active traders may want more powerful active trading tools

• No electronic deposit for contributions

Fidelity self-employed 401 accounts are a great choice for fee-conscious investors, earning our top overall pick. The Fidelity solo 401 charges no opening or closing costs and no annual maintenance fees. Customers can invest in stocks, ETFs, and over 3,400 mutual funds with no trading commissions. That means many small business owners could use this account without ever paying any fees to Fidelity. If you need help to place orders, however, the $32.95 broker-assisted trade fee may be an impediment.

Read our full Fidelity review.

Recommended Reading: How Do You Roll Your 401k Into An Ira

What To Consider When Choosing A Broker

If youre planning to roll over your 401 into an IRA, youll likely be most concerned with a broker that can do the following things best. Most brokers do offer an IRA, but some popular ones do not, but the brokers above all offer IRAs. We also considered the following factors when selecting the top places for your 401 rollover.

• Price: Trading commissions for stocks and ETFs have fallen to $0 at most online brokers, and thats great for investors. But there are other costs, too, perhaps most notably account fees, such as fees for transferring out of your account.
• No-transaction-fee mutual funds: The brokers in the list above offer thousands of mutual funds without a transaction fee. If youre rolling over your 401 and you like the mutual funds you have already, these brokers may allow you to buy and sell the same one without a fee.
• Investing strategy: While a 401 may limit your investing options to a pre-selected group of mutual funds, an IRA gives you the ability to invest in almost anything trading in the market. So we considered how each broker might fit an investors needs.

Types Of 401k Plans: Which One Is Right For You

Use a retirement calculator to choose the best plan. You and Your 401K

If your employer offers a 401k plan, experts generally agree that you should be taking advantage of it and making contributions from each paycheck toward your retirement savings. However, not all employer-sponsored retirement plans are alike. Many employers offer what is considered a traditional 401k, but there are also safe harbor 401k plans, SIMPLE 401k plans, Roth 401k plans and 403b plans.

Keep reading to find out about which 401k plans might be available to you, the pros of cons and each, and how to determine if a 401k plan is the right choice for you and your retirement planning and saving goals.

Recommended Reading: Can I Change My 401k Contribution At Any Time

Learn Why Others Work With Adp

The Maryland Association of CPAs discuss their experience with ADP Retirement Services and why they chose ADP as their retirement plan provider.

Tom Hood, Exec. VP Business Growth & DevelopmentAICPA

*The views expressed herein are the speaker’s own. Not all clients will experience the same results. ADP has not compensated any clients for the included testimonials.

How To Choose A 401 Provider

Youll first need to choose the firm that provides the type of retirement plan you really want to offer, whether thats a traditional 401 plan or something else. Also take a look at the plan design to ensure that their eligibility requirements, vesting schedule, investment options and other details are appropriate for your employees. Youll also need to evaluate the fees attached to your retirement plan. Often, fees vary depending on your business and the number of employees, so you will need to get in touch with each provider directly to receive a quote.

On a qualitative level, youll likely want to work with a 401 provider with excellent customer service, individualized investment and plan design guidance and a support team thats easy to reach especially because the landscape of retirement plans can be confusing to navigate, both for you and your employees.

Moreover, you should consider a provider that acts as a fiduciary advisor. Fiduciaries are legally and ethically bound to provide unbiased investment advice that aligns with their clients best interests. They also manage, monitor and adjust their clients retirement plans. There are several types of fiduciaries, but youll most often see the term 3 fiduciary.

Also Check: Can I Put Money In 401k And Ira

Read Also: How Do I Protect My 401k In A Divorce

Best For Active Traders: Td Ameritrade

TD Ameritrade

Most retirement-focused investors would do well to stick with a passive investment style. However, if youre into active investing, TD Ameritrade offers industry-leading platform options and tools.

• Choose between multiple web, mobile, and desktop platforms

• Access the advanced thinkorswim trading platform with no added costs

• Accounts will move to Charles Schwab in the future

• Advanced platforms may be overwhelming for newer traders

TD Ameritrade is another renowned discount brokerage and our choice as best for active traders. It offers an individual 401 account with no recurring fees and commission-free stock and ETF trades. Its standout feature for active traders, though, is the thinkorswim active trading platform, which is available on desktop, mobile, and the web.

Before diving into other details, its important to note that this brokerage has been acquired by Charles Schwab. TD Ameritrade accounts will become Schwab accounts at some point in the future. However, as you can see from its review on this list, were fans of Schwab as well and look forward to seeing the combined capabilities once the integration is complete.

Read our full TD Ameritrade review.

Why Im Investing 100% Of My 401 Into 5 World

In 2023 Im going to rebalance my portfolio around five world-beater blue-chip assets based on the Dividend Kings ZEUS retirement portfolio strategy.

• 33% blue-chip ETFs
• 33% hedging assets
• 33% individual stocks.

ZEUS = Zen Extraordinary Ultra SWAN and let me show you why it lives up to that name.

In fact, ZEUS is the king of sleep well at night retirement portfolios.

Now there are infinite combinations of the ZEUS portfolio.

Here is our family friend Roses ZEUS High-Yield Ultra-Low Volatility portfolio.

You can build a ZEUS portfolio to optimize for any goal you want.

• maximum safe yield today

You can use anywhere from 1 stock exchange-traded fund to as many as you want .

You can use using hedging ETFs like EDV , DBMF , SHY cash.

And you can buy anywhere from 2 to 20 individual blue chips, which is the key to this strategy.

• the bonds, managed futures, and cash help you sleep well
• the stock ETFs ensure you cant lose all your money
• the individual blue-chips turbocharge your yield, growth, and total returns.

Let me show you how I built my personally optimal ZEUS 401 retirement portfolio.

• my Roth IRA is the same thing, just 1/3rd the size.

Don’t Miss: How Much Can You Rollover From 401k To Roth Ira

Determine How Much You Can Contribute

Workers under 50 can contribute up to $19,500 to a 401 in 2020, but how much you actually earmark for the account depends on your income, debt level and other financial goals. Still, financial experts advise contributing as much as you are able to, ideally between 10% to 15% of your income, especially when you are young: The sooner you start investing, the less you’ll have to save each month to reach your goals, thanks to compound interest.

“That’s your company literally saying: ‘Hey, here’s some free money, do you want to take it?'” financial expert Ramit Sethi told CNBC Make It. “If you don’t take that, you’re making a huge mistake.”

Get Your Employees Engaged Informed And Ready For Life’s Financial Challenges

About 50 percent of employees save less than $5,000 per year for their retirement.4 When employees understand their retirement plan benefits, theyre more likely to enroll and use those benefits to their full potential.

Get your employees on the right path to retirement with helpful tools and resources, including:

• An award-winning employee education program and a team of retirement counselors to help your employees get ready for retirement
• A Financial Wellness website6 to help employees plan for lifes financial challenges
• A Retirement Readiness Score7, which helps your employees understand where they are in saving for retirement
• A targeted mobile-phone messenger that provides important retirement information to employees, and helps them develop better retirement savings habits

With 2 in 3 employees claiming their benefits package helps reduce financial stress5, our award winning participant materials, and retirement calculators and tools will be appreciated.

Recommended Reading: Can You Rollover A Pension Into A 401k

Option : Keep Your Savings With Your Previous Employers Plan

If your previous employers 401 allows you to maintain your account and you are happy with the plans investment options, you can leave it. This might be the most convenient choice, but you should still evaluate your options. Each year, American workers manage to lose track of billions of dollars in old retirement savings accounts, so you should make sure to track your account regularly, review your investments as part of your overall portfolio and keep the beneficiaries up to date.

Some things to think about if youre considering keeping your money in your previous employers plan:

Go Back To Your Workplace Plan

So, what happens if you max out your Roth IRA and still havent hit 15%? If that happens, you can go back to your workplace plan and invest there until you hit 15%.

Thats it! Between your employer-sponsored plan , 403, etc.) and a Roth IRA, you should be able to save enough money for retirement while enjoying the tax benefits both accounts have to offer.

Also Check: How Can You Get Money From Your 401k

Best For Low Fees: Charles Schwab

Charles Schwab

The Individual 401 Plan from Charles Schwab is our top choice for low fees. The account has no opening or maintenance fees as well as no commission trades for stocks or ETFs and over 4,000 no-load, no-transaction-fee mutual funds. Customers can also use its robo-advisor, Schwab Intelligent Portfolios, with no extra fees.

• Accounts are free to open and charge no recurring fees

• Access to trade stocks, ETFs, and thousands of mutual funds for free

• Option for a no-cost robo-advisor

• No solo 401 loans

• High fees for some mutual fund trades and broker-assisted trades

Charles Schwab is our top choice for low fees in a solo 401 plan. Schwabs version charges no recurring fees and no setup fees. It offers commission-free trades for all stocks and ETFs as well as over 4,000 no-transaction-fee funds on the Schwab OneSource funds list. While Schwab offers excellent customer service, be aware that automated phone trades cost $5 and broker-assisted trades cost $25 each. However, many customers could use this account without paying any fees.

Schwabs Solo 401 doesnt offer 401 loans. Its active investment platform may not satiate all expert investors, and its active charting and analysis tools lag behind some other brokerage platforms for active traders. However, the pending integration of TD Ameritrade will bring the coveted thinkorswim platform under the Schwab umbrella, which is something active traders at Schwab can look forward to.

Investment Options: The Diy Approach

Target-date funds arent for everyone, and some prefer to adopt more of a hands-on approach. You typically cant invest in specific stocks or bonds in your 401 account. Instead, you often can choose from a list of mutual funds and exchange-traded funds . Some of these will be actively managed, while others may be index funds.

So what kinds of funds and investments can you expect to see?

You can bet that almost every plan will have large-cap stock funds. These are funds made up entirely of large-cap stocks, of stocks with a market capitalization of over $10 million. Large-cap stocks make up the vast majority of the U.S. equity market, so your 401 will almost certainly have multiple funds to choose from that invest in them. Notable large-cap funds include the Fidelity Large-Cap Stock Fund and the Vanguard Mega Cap Value ETF .

Another type of mutual fund youll likely find in your 401s catalog of option is a bond fund. A bond fund is a mutual fund that invests solely in bonds. Within this category exists several categories like corporate bond funds, government bond funds, short-term bond funds, intermediate-term bond funds and long-term bond funds. Bond funds are popular because, as a general rule, they provide the safety of investing in bonds, but theyre much easier to buy and sell than individual bonds. Still, bonds arent risk-free: Longer term bonds can be hurt by rising interest rates, and so-called junk bonds are at risk of default.

Also Check: How Much Does A Solo 401k Cost

Also Check: When Can I Take Out My 401k